Spansion, Post Merger, to Launch Auto SoC Mid-2014

Over the last three months, Spansion has been busy making "a bunch of changes" in product roadmaps and IP blocks that need to be worked into new platforms.

Of the people, process, real estate and IT areas where integration needs to take place, process technology is an area demanding close attention. For Spansion whose main business had been on memory products, MCU and analog processes present a big change. The new businesses require "tighter time-to-market and product life cycle management," Kispert explained.

Merging the IT systems of the two companies also has "still a long way to go," he added.

Asked if Spansion is laying off any people, the CEO said no. "I don't see it in the foreseeable future, either." Kispert made it clear that the merger is about "incorporating" the two organizations, rather than "consolidating the two."

As for real estate, the CEO said, "That's an easier part. It's a matter of moving people from one building to another." During the earnings call, Randy Furr, Spansion's CFO, noted: "In Q1, we concluded the sale of our Sunnyvale headquarters campus."

Looking ahead As for the first quarter forecast, Spansion estimates net sales to be "$295 million to $320 million," with the non-GAAP gross margin to be "32.5 percent to 34.5 percent." The company downplayed the flat Q1 forecast, noting that given the normal seasonality experienced in its flash business, this outlook actually reflects "the consistency and strength from the analog and microcontroller businesses," according to the CFO.

Spansion's internal fab ran at about 65% equipment utilization in Q4. The company expects the rate to be similar in the first quarter. While 65% seems like a low rate, the CFO noted, "This gives us a lot of leverage in the second half of 2014, where we expect fab utilization to improve." The fact is that Spansion continues to work out inventory. By the second half of this year, Spansion, however, is expecting to see "a fairly decent pickup" in overall capacity utilization.

On a US GAAP basis, Spansion reported fourth quarter operating loss of $9.4 million and net loss of $23.7 million. The GAAP operating loss includes $5.8 million of acquisition related costs and purchase accounting inventory markup. As a result of the Fujitsu microcontroller and analog/mixed signal acquisition, "purchase accounting requires inventory to be written off essentially to market value," Furr explained. Therefore, until the acquired inventory flows through P&L, he cautioned, "Our GAAP gross margin will be low."

Fourth quarter 2013 results in millions.

Spansion in Q4 was hit with sizeable litigation charges — as much as $13 million. Spansion had filed two separate lawsuits against Macronix for IP infringement, and Macronix filed two counter complaints.

The International Trade Commission's trial date for Spansion's case against Macronix is set for May.

For Spansion, commercializing and protecting the company's IP through licensing (and litigation) is a key pillar for its business. Other key areas include: growing the MCU business worldwide (including 8-bit, 16-bit and 32-bit proprietary and 32-bit ARM-based microcontrollers), expansion of its analog business across all markets and regions; growing embedded flash memory leadership position, and integrating the company's embedded flash technology into a broad range of solutions.

My first reaction was that Spansion is late to the SoC game, but the strategy of specializing on the automotive space might turn out to be a very good idea. It seems like there is a surge in the sophistication of the onboard systems in automobiles that could be a good opportunity for a company willing to focus on them. This would be a change from many semiconductor companies that try to be all things to all customers.

Many of today's MCU's and SoCs integrate some non-volatile memory. But suppliers of those SoCs are not able to scale the memory cells and its performance to keep pace with their advancements in logic design.

If Spansion's memory expertise can efficiently scale the embedded memory, it will certainly help their logic design. After all, not many logic design companies do not have memory expertise.

I've read somewhere that the non-volatile memory is becoming a higher percentage of the overall die. If so, it would end up in a sub-optimal logic process and larger, more costly die sizes.

thank you Junko...I thought the problem was the flash uses different processing steps than logic...so the CMOC process that can do both flash and logic would be more expensive negating the benefit of having flash technology in your pocket...Kris

Embedded Flash adds 6 to 8 masks to a logic process. Many MCUs include Flash and most MCU manufacturers and most foundries have embedded Flash options of varying densities. Stand alone NOR Flash (Spansions specialty) is a much smaller market than NAND Flash and is shrinking so this is probably an attempt to develop a growth strategy.

The Fujitsu Semiconductor acquisition in August is paving the way for Spansion's development of new SoCs integrating dissertation writing service Spansion's embedded flash technology with MCU, analog, and power management ICs.